TCF bank pays off TARP, pays extra to dump Treasury control

posted at 2:13 pm on April 24, 2009 by Ed Morrissey

Local banker Bill Cooper, who runs TCF Bank in the Twin Cities, has established himself as a tough-as-nails businessman and has won the admiration of many in this area. Today’s announcement exemplifies why. Cooper has repaid the TARP funds in order to get Treasury off his back, even though he had to pay a premium to do so:

TCF Financial Corporation announced Wednesday that it had completed the repurchase of its TARP preferred stock from the U.S. Treasury. It paid a redemption price of $361.2 million plus accrued dividends of $3.4 million.

TCF Chairman and CEO William A. Cooper said the bank had maintained a strong capital position over the last year through its own operations, and it didn’t need to rely on the public capital infusion to continue its traditional lending pace. Cooper said TCF is the largest bank to pay back TARP funds to the U.S. Treasury.

But that didn’t come without Treasury getting one last shot at dictating business terms to Cooper:

As part of the agreement for withdrawing from the program, TCF also agreed to reduce its first-quarter dividend from 25 cents to 5 cents.

In other words, Treasury just cut 80% of the revenue for the stockholders as a penalty for early repayment of the TARP funds. Does that make sense to anyone else? Shouldn’t Treasury reward fiscal responsibility in its banks by allowing owners (stockholders) to realize their profit? King Banaian calls it a “ransom”:

Contemplate that last sentence: The government required TCF to drop its dividend in order to repay its loan. Would a bank be allowed to make you drop your kid’s allowance from $5 a week to $1 before you could pay off the auto loan early? Banks in trouble often end up in agreements with the Fed that include seeking permission to pay any dividends, but banks were brought into TARP as a matter of solidarity, even patriotism. Solidarity isn’t free, I guess.

It shows pretty clearly that at least a good part of the motivation behind TARP liquidity injections was to gain control of bank operations, and not just to rescue the banking sector. Forcing Cooper and TCF stockholders to pay a ransom in order to get their bank back is counterintuitive under any other scenario.

Still, I’m betting that Cooper is happy to pay it off in order to get the Treasury out of his affairs. I wonder how many others Cooper will inspire to force Treasury to accept repayment of TARP funds?

Blowback

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I beleive when you borrow from the mob, they get the vig, whether you pay it back in installments or all at once.

I smell a shareholders lawsuit against the government. And why the hell would a successful businessman need a failure like Geitner to run his business? And if the so called argument is against “bad rich businessman” – wouldn’t you want more sharholders to get more money through a dividend, rather than a bank keeping the profits for themselves? Also – will the bank be illegally paying out a less dividend, based on their sharholders agreement? And how about the tax implications to both the bank and shareholders?

As part of the agreement for withdrawing from the program, TCF also agreed to reduce its first-quarter dividend from 25 cents to 5 cents.

I can’t let this one go. To me, this sounds like the Fed is deliberately trying to sabotage the business that it forced to take TARP funds. it kinda puts this whole bailout scam into an entirely new perspective.

I’m sure I don’t quite get this. Isn’t the only control the government has over the banks that took funds the threat to pull the funds back? How then can it exert control to punish them for giving it back?
I feel like I am missing something truly bizarre hidden in all of this.

It shows pretty clearly that at least a good part of the motivation behind TARP liquidity injections was to gain control of bank operations, and not just to rescue the banking sector. Forcing Cooper and TCF stockholders to pay a ransom in order to get their bank back is counterintuitive under any other scenario.

The government already had the ability to dictate capital ratios for banks. It is logical for them to lower the dividend to adjust for capital coming off the balance sheet.

For the share holders who now don’t have to pay the government its interest and don’t have to pay dividends to themselves, they will see the market value of the equity increase (earnings will be higher).

This is positive, also, from a tax standpoint. The IRS doesn’t net dividends against capital losses; however, stock gains are. In a year where investors likely have plenty of capital losses to realize, the TCF Bank gains would be essentially tax free.

Good for TCF Bank. The government should knock it off with management decisions like compensation and credit card rates.

As part of the agreement for withdrawing from the program, TCF also agreed to reduce its first-quarter dividend from 25 cents to 5 cents.
Be honest Ed.
TCF will fail a stress test if its undercapitalized.
I hate how dishonest you are sometimes.

This doesn’t surprise me. We’re refinancing our mortgage, and one of the opportunities was an FHA loan. It had a good rate, BUT I would be required to carry mortgage insurance (tax deductible, tho). Also, a penalty is charged for an early payout.

Wade on April 24, 2009 at 2:19 PM
Dressed them down for hiking interest without notice.

Which is exactly what Timmuh! is doing to the banks that don’t want the TARP money any more. I guess it all depends on who’s ox is being gored.

iurockhead on April 24, 2009 at 2:23 PM

Me thinks there are a few reasons why Bambi is “going after credit card companies”
1) They need payments to make money, and in times like now, when people arent using as much credit and many are not even making minimum payments – they need Bambi’s “talking to”
2) Low income folks who received credit cards – at high rates are primarily black. Of course, the predator companies like Providian , Capital One and other vendors were forced to lower their standards and created the suppressed credit model in the first place – due to gv pressure for poor folks to buy bling.

This is not a President looking out for ordinary Americans -its just another reversal of their original policies to get a hamburger today and pay you on Tuesday…

If I was a financial institution I know I would get out from under the government’s thumb P.D.Q. I wonder if all of the banks that payback will be penalized since some of them only took the money on the instructions of the regulators. TARP should have never been passed.

Good for the government. They got out with a profit (on a loan the bank probably didn’t want)and then they only screwed the shareholders out of one dividend. With government service like this we can all feel secure.

Didn’t Obama just have a big meeting yesterday about the evil credit card companies and the issue of late payment charges and excessive high interest rates??? Talk about utter hypocrisy!! So here is the Treasury doing one even worse than any credit card companies. Your government is now the new, bigger & brutal mafia. I don’t think Obama will have much political capital left.

I would comment more around here, but it’s birdbrained, no-depth pests such as this one that have soured me on the experience of commenting on Hotair. Maybe this will be a turning of the tide for this site if he/she means what he/she says here.

TARP is now EXACTLY what these clowns claimed they wanted to avoid. Any bank keeping TARP funds longer than the end of the year is too weak to get out. Beware. And any financial institution of ANY kind that takes government assistance going forward is a dead company walking. Run away.

I would comment more around here, but it’s birdbrained, no-depth pests such as this one that have soured me on the experience of commenting on Hotair. Maybe this will be a turning of the tide for this site if he/she means what he/she says here.

Edouard on April 24, 2009 at 2:50 PM

Ah just go ahead and comment more anyway. Just use douchebag trolls like getalife as batting practice.

It’s like those scam loans where you get charged for paying it off early.

BadgerHawk on April 24, 2009 at 2:16 PM

That is not a scam. The mortgage writer or other loaner has costs involved in issuing a loan. He is justified in writing a contract which includes an early repayment penalty.

Hopefully the 2nd quarter dividend will be a big one. This is just absurd.

Aggie85 on April 24, 2009 at 2:18 PM

It appears to me and apparently to Aggie85 that contrary to the title, the government is not charging TFC any money for early payment. The government is supposedly chastising TFC by the government acting like a donkey rear end.

Banking industry could be roiled as US government details methodology of ’stress tests’

WASHINGTON — Regulators trying to stabilize the financial system could unwittingly roil it when they explain their methods Friday for stress-testing the largest banks.

COULD BE UNWITTINGLY
could be purposely

maverick muse on April 24, 2009 at 10:04 AM

The POR Economy

“Federal Receipts Tank”
Tom Blumer
Chicago Daily Observer

This year, it’s shaping up to be the “Bailout Year Bummer.”

Uncle Sam’s fiscal year began on October 1 of last year, mere days before Congress passed the legislation that has come to be known as TARP, and a bit more than three months after Nancy Pelosi, Barack Obama, and Harry Reid promised to starve the economy of energy and punitively tax its highest producers, creating what I have since called the POR (Pelosi-Obama-Reid) Economy.

Ok, I should have written that more clearly. Deceptive loans, maybe? Yeah it’s up to the individual to read anything they sign in its entirety, but it’s tough to call an ARM that has pre-pay penalties anything other than a scam.

While I agree that the requirement was presumptuous, I don’t think it affects the Shareholders significantly. By reducing the ONE dividend payment, the bank should be raising its on-hand capital. Assuming that there was really no need for the TARP funds to provide it, the bank should just show an increased stock price that reflects this. This guarantees that there is an enhanced pool of capital in case the bank was wrong about its requirements.

And they can always declare a special dividend of $.45 in the second Q to catch up.

You know, I was looking at Fox’s new poll that they have out, and Obama’s approval rating is 61/32 and then they ask if the country is going in the right direction which was 36(yes)/56(no). I mean isn’t Obama leading the country? How can people be happy with him and then say the country is going on the wrong direction? People do not make sense!

I am banning myself.
The stink of evil on this blog is too much for me.
The devil is at work here.
I will pray for you.
getalife on April 24, 2009 at 1:32 PM

BadgerHawk on April 24, 2009 at 2:14 PM

Saw that on the other thread. So we’ve lost one bot-script, we still have the others: strangleit (too bad its mother didn’t), growapair, notnicexxx, and a few others.

Not sure they really qualify as trolls though. they seem to fall more into the Orc category. For those familiar with Dungeons & Dragons, orcs were low-level monsters with low intelligence, few hit points and were designed to provide experience to low-level characters before moving on to more challenging adventures. The resident orcs have all the same characteristics: making strawman arguments, exhibiting only the ability to regurgitate left-wing talking points with no ability for advanced or independent thought. While bashing these orcs might be fun occasionally, it’s not really very satisfying since there is little challenge to it. As D&D players became more experienced,Orcs were simply an annoying distraction that got in the way of more interesting things happening. Same with the resident orcs.

“that make sense to anyone else? ” (that the feds would force a bank opting out of TARP to pay a steep penalty)

Sure it makes sense.

It makes sense to people dedicated to destroying American business and implementing communism.

It’s a chilling message that:
a) we have the power to do anything we want to you, and
b) if you don’t do it our way, we will punish you severely to insure we will only have to use force sparingly with your less courageous competitors.

Slightly OT but freaky-deaky: I heard Beck mention the other night that Obama uses a team of Behavioral Psychologists to help him “find how to make people think they need to do what he wants them to do” or something like that.

If neoclassical economics wants government to let us alone to do what we want, behavioral economics leaves room for government action to help us do what we would really want if we were rational agents.

The problem, as anyone with a sweet tooth, an alcoholic relative or a maxed-out Visa card knows, is that old habits die hard. Temptation is strong. We are weak.

The idea of public officials, even well-meaning ones, trying to engineer our private behavior to produce change can seem a bit creepy.

But face it: Obama is right. Our emissions are boiling the planet, and most of our energy use is unnecessary. Our health expenditures are bankrupting the Treasury, and most of our visits to the doctor can be traced to unhealthy behavior. We do need to change, and we know it.

I don’t think it affects the Shareholders significantly.
OBQuiet on April 24, 2009 at 3:04 PM

Think again.

President Obama showed his hand this week when The New York Times wrote that he is considering converting the stock the government owns in our country’s banks from preferred stock, which it now holds, to common stock.

This seemingly insignificant change is momentous. It means that the federal government will control all of the major banks and financial institutions in the nation. It means socialism.

Controlling the banks is the only rational explination for making that move. If they were interested in having the TARP monies paid back, or returning money to the tax payers, or reducing the defecit they’d keep the preferred and take the dividends.